Dave Ramsey: Don’t Fall Victim to the HOA

Eric from Tampa, Florida, has an issue with the rising prices of Homeowner’s Association (HOA) fees. Eric would like to move back to Michigan to be closer to family, but the condo he is looking at has ridiculously high amounts of HOA fees.

Eric wants Dave’s advice on how much is too much. Dave states that you shouldn’t be paying a disproportionate amount in fees. If you spend $1500 in rent but $1000, you pay too much to the HOA.

Dave asked Eric to research the HOA before he moves and make sure they set aside funds for everything. Dave recalls getting slammed for restoring the parking lot of a condo he lived in, but his HOA fees were super low.

Dave suggests checking into their spending habits too. If they are spending too much, they are probably charging too much. You can’t turn a rinky-dink condo into the Taj Mahal. A good association will have an agent that assists the president in making sure the funds are going to the right places.

Finally, check into the politics of the place. If you have someone in charge to be in charge, you may have a bad experience. Make sure they spend their time improving the community and not just checking bushes for the correct diameter.

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Dave Ramsey’s 7 Babysteps For Success

• Baby Step #1 Save 1000

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  In this first step, your goal is to save $1,000 as fast as you can. Your emergency fund will cover those unexpected life events you can't plan for. And there are plenty of them. You don’t want to dig a deeper hole while you’re trying to work your way out of debt!

• Baby Step #2 Pay Off All Debt (Except the House) Using the Debt Snowball

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  Next, it’s time to pay off the cars, the credit cards and the student loans. Start by listing all of your debts except for your mortgage. Put them in order by balance from smallest to largest—regardless of interest rate. Pay minimum payments on everything but the little one. Attack that one with a vengeance. Once it's gone, take that payment and put it toward the second-smallest debt, making minimum payments on the rest. That's what's called the debt snowball method, and you’ll use it to knock out your debts one by one.

• Baby Step #3 Save 3–6 Months of Expenses in a Fully Funded Emergency Fund

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  You’ve paid off your debt! Don’t slow down now. Take that money you were throwing at your debt and build a fully funded emergency fund that covers 3–6 months of your expenses. This will protect you against life’s bigger surprises, like the loss of a job or your car breaking down, without slipping back into debt.
• Baby Step #4 Invest

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  It's time to get serious about retirement—no matter your age. Take 15% of your gross household income and start investing it into your retirement. Start with your company’s 401(k) plan and invest up to the full employer match. Then invest the rest into Roth IRAs—one for you and one for your spouse (if you’re married).

• Teach Your Kids Financial Responsibility

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• Baby Step #6 Pay Off Your Home

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  Now, bring it all home. Baby Step 6 is the big dog! Your mortgage is the only thing between you and complete freedom from debt. Can you imagine your life with no house payment? Any extra money you can put toward your mortgage could save you tens (or even hundreds) of thousands of dollars in interest.
• Baby Step #7 Build Wealth and Give

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  You know what people with no debt can do? Anything they want! The last step is the most fun. You can live and give like no one else. Keep building wealth and become outrageously generous, all while leaving an inheritance for your kids and their kids. Now that's what we call leaving a legacy!

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